The stock market is made out to be so complex. You have to wonder if the powers that be, most who invest in stock market, intended for this complexity. The confusion is compounded with all of these indexes, ratios, and other, so called, intelligent formulas. In spite of all of this, stock market beginners still want to learn how the stock market works. So in this piece, I will attempt to explain the how the stock market works without all of the extras.

The beginning of the process starts with a person who creates a new company that needs financing for operations. The new company can be financed using a couple of methods. These methods could include financing through a bank loan, loan from family member, personal life savings, or the issuance of stock. The issuance of stock could be also called equity financing. The reason why it is called equity financing is because the creator of the company is giving up ownership to investors.

The process of issuing the stock is called the initial public offering or IPO. Basically, a company who is looking for equity financing will go through an investment bank to sell its stock to investors. The investors who are involved in the initial public offering are considered the first investors in the company. At this point the first investors can decide whether they want to hold on to the stock or sell their investment.

So who are the first stock investors going to sell their investments to? Stock sellers sell their investments to stock buyers. Anything that can be bought and sold has a market. Stock sellers and stock buyers make up the stock market. Also most things that can be bought and sold have a trading post or location where transactions between buyers and sellers can take place. In the case of the stock market this place happens to be a stock exchange.

So now you are wondering how the stock market price is set. The stock market price is determined between the stock sellers and buyers. The sellers will determine the price that they want sell their investment. On the other hand buyers will determine the price they want to pay for an investment. The stock price also depends on how much the seller wants to sell and how much the buyer wants to buy. Eventually, the stock sellers and buyers will come to an agreement on the price. This agreed upon price is the stock market price.

The stock market is essentially a meeting place where buyers and sellers of stock come together. Stock market investor is basically trying to sell their ownership in a company to an investor trying to buy ownership. A stock market investor selling stock is similar to a business owner selling their business or equity. The only difference is the scale.

When I talk stock market investing to family and friends the question that always comes up is what are the best stocks or companies to invest in. My response to this question surprises a lot of people, but I am just stating facts.

My response to the question:

Companies that sell products that are not necessarily good for us with regard to our health and well being are the best companies to invest in. This statement can be supported with tons of facts. So in a nutshell products and services that may not be good for you can be good to you….For investment purposes.

Now some people may get offended, but these are facts. Frankly, if you feel morally obligated not to profit from companies that sell products and services that may not necessarily be good for their customers in the long run, then do not invest in these companies.

When I was in college an organization that I was part of had a meeting with representatives from Phillip Morris who, by the way, are the makers of the #1 cigarette brand Marlboro. Now I asked one of the reps, “Why are you guys selling products that you know may hurt people in the long run?” The reps response was, “We produce and sell the best products to people who choose to use them.” The key point to take out from this response is “people who choose to use them.” Basically as consumers we have choices whether we want to use a product or not.

Now get this, Phillip Morris advertises against themselves and they are still making money hand over fist. Several political institutions, including the United States and the UK, have placed several advertising restrictions on the tobacco industry as a whole. The European Union recently passed a treaty that mandated tobacco companies must prominently display the effects of smoking on cigarette packages. In the USA, you commonly see commercials on TV sponsored by Phillip Morris that highlight the effects of smoking. In spite of that, cigarette companies are still making profits worldwide. Any company that advertises against itself and still makes money is insane but cigarette companies are proof that it can be done.

EU requirements cigarettes.

Okay so here is a short list of industries that are responsible for products and services that may not be good for you but good you…For investment purposes….

1. Fast Food Industry – McDonald’s
2. Liquor Industry – Coors, Budweiser
3. Cigarette Industry – Phillip Morris
4. Confectionery Industry (Candy) – Hershey’s, Nestle
5. Soft Drink Beverage Industry – Coke, Pepsi

Stay tuned for the next post. Make sure you fill in the form below to get access to the free preview version of our ebook.

Stock market investors, like me, are always seeking out new companies to invest in. Just to clarify, stock represents a company and a company represents a stock. With that said, the two terms can be used interchangeably. Moving on, investors do not simply find companies by looking in the Wall Street Journal, watching Jim Kramer, or financial television shows. While stock market investors definitely employ these methods, for the most part they observe their surroundings.

Let me explain how investors observe their surroundings. Let say for example I am dining at a restaurant and the waiter serves me some wine that I absolutely love. As an investor I will find out what company makes or distributes this brand of wine. I will simply find this out by checking out the packaging on the bottle. While dining at a restaurant I have found one company that I can potentially invest in. As an investor I always have my eyes open for companies that I can invest in.

And finally:

5 Simple Places To Find Companies To Invest In

1. Your Kitchen

Look in your fridge. Do you see all the food and beverage products that you eat or drink all the time? Check out your cupboard. Have chicken noodle soup? Chances are it’s made by this company called “Campbells”(hint). Do you have a bag of chips? I willing to bet even money that those chips are made by a company called Lays, who, by the way, is a subsidiary of PepsiCola (hint).

2. Your Bathroom

I think you would agree that toilet paper is probably one of most used products on the planet. What company makes your toilet paper? Second to toilet paper, as one the most used products, would have to be bath soap. Who manufactures and distributes your soap? Lets not forget about your toothpaste, dental floss, toothbrush, hair care products, shaving creams, and shavers. Lets just agree that you have a lot of investment options in your bathroom.

3. Your Purse (Specifically for women)

This one is specific for the ladies. Guys I do not think that the ladies want you going inside their purses. Besides having money inside their purse, ladies will have lipstick, concealer, blush, peppermints, gum, credit cards, and lets not forget about sanitary products. Who makes these products? With regard to the credit cards, who is your credit card provider? Credit card companies are huge and they make money on the front end and the back end. They charge companies fees to accept their cards and they charge the people who use the cards interest fees.

4. Your Job

Chances are you work for a corporation. Have you invested in the company that you work for? A lot of companies give their employees incentives to invest in their stock. I worked for a company that gave me a 15% discount off of each share I bought. That is a built in 15% return on my investment. I would advise you to find out what kind of incentives your company has for investing in their stock. Also keep an eye on the suppliers that your company uses. Who supplies the computers, software, delivery services, wholesale products, leases the building your company is in?

5. Medicine Cabinet

We all get sick every now and then. Usually we have a stock pile medicines in our medicine cabinet that we use to get us back to 100%. What medicines do you use time and time again when you get sick? I would bet that up to 75% of every household the USA, if not the world, has Tylenol in their medicine cabinet. How about Pepto Bismol, Advil, Prilosec, Allegra, or Claritin? Do you know who makes these products?

This should help you get started with finding companies to invest in. If you have any questions feel free to contact me at omarbest@howtobeastockmarketplayer.com. Also if you have not received the Preview Version of How To Be A Stock Market Player enter your email address in the address bar below.